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39-28-203

Requirements

Any tobacco product manufacturer selling cigarettes to consumers within
the state, whether directly or through a distributor, retailer, or similar
intermediary or intermediaries, after July 1, 1999, shall either:

(1) Become a participating manufacturer as that term is defined in section
II(jj) of the master settlement agreement and generally perform its financial
obligations under the master settlement agreement; or

(2) (a) Place into a qualified escrow fund by April 15 of the year following
the year in question the following amounts as such amounts are adjusted
for inflation:

(I) 1999: $.0094241 per unit sold after July 1, 1999;

(II) 2000: $.0104712 per unit sold;

(III) For each of 2001 and 2002: $.0136125 per unit sold;

(IV) For each of 2003 through 2006: $.0167539 per unit sold;

(V) For each of 2007 and each year thereafter: $.0188482 per unit sold.

(b) A tobacco product manufacturer that places funds into escrow pursuant
to paragraph (a) of this subsection (2) shall receive the interest or
other appreciation on such funds as earned. Such funds themselves shall
be released from escrow only under the following circumstances:

(I) To pay a judgment or settlement on any released claim brought against
such tobacco product manufacturer by the state or any releasing party
located or residing in the state. Funds shall be released from escrow
under this subparagraph (I):

(A) In the order in which they were placed into escrow; and

(B) Only to the extent and at the time necessary to make payments required
under such judgment or settlement;

(II) (A) To the extent that a tobacco product manufacturer establishes that
the amount it was required to place into escrow on account of units sold
in the state in a particular year was greater than the master settlement
agreement payments, as determined pursuant to section IX(i) of that agreement
including after final determination of all adjustments, that such manufacturer
would have been required to make on account of such units sold had it
been a participating manufacturer, the excess shall be released from escrow
and revert back to such tobacco product manufacturer;

(B) If Senate Bill 04-182, enacted at the second regular session of the sixty-fourth
general assembly, or any portion of the amendment to sub-subparagraph
(A) of this subparagraph (II) made by Senate Bill 04-182 is held by a
court of competent jurisdiction to be unconstitutional, then sub-subparagraph
(A) of this subparagraph (II) shall be deemed to be repealed in its entirety.
If this paragraph (b) shall thereafter be held by a court of competent
jurisdiction to be unconstitutional, then Senate Bill 04-182 shall be
deemed repealed, and sub-subparagraph (A) of this subparagraph (II) shall
be restored as if no such amendments had been made. Neither any holding
of unconstitutionality nor the repeal of sub-subparagraph (A) of this
subparagraph (II) shall affect, impair, or invalidate any other portion
of this section, and such remaining portions of this section shall at
all times continue in full force and effect.

(III) To the extent not released from escrow under subparagraph (I) or (II)
of this paragraph (b), funds shall be released from escrow and revert
back to such tobacco product manufacturer twenty-five years after the
date on which the funds were placed into escrow.

(c) (I) Each tobacco product manufacturer that elects to place funds into
escrow pursuant to this subsection (2) shall annually certify to the attorney
general that it is in compliance with this subsection (2). The attorney
general may bring a civil action on behalf of the state against any tobacco
product manufacturer that fails to place into escrow the funds required
under this section. Any tobacco product manufacturer that fails in any
year to place into escrow the funds required under this section shall:

(A) Be required within fifteen days to place such funds into escrow as shall
bring it into compliance with this section. The court, upon a finding
of a violation of this subsection (2), may impose a civil penalty, to
be paid to the general fund of the state, in an amount not to exceed five
percent of the amount improperly withheld from escrow per day of the violation
and in a total amount not to exceed one hundred percent of the original
amount improperly withheld from escrow;

(B) In the case of a knowing violation, be required within fifteen days to
place such funds into escrow as shall bring it into compliance with this
section. The court, upon a finding of a knowing violation of this subsection
(2), may impose a civil penalty, to be paid to the general fund of the
state, in an amount not to exceed fifteen percent of the amount improperly
withheld from escrow per day of the violation and in a total amount not
to exceed three hundred percent of the original amount improperly withheld
from escrow; and

(C) In the case of a second or subsequent knowing violation, be prohibited
from selling cigarettes to consumers within the state, whether directly
or through a distributor, retailer, or similar intermediary or intermediaries,
for a period not to exceed two years.

(II) Each failure to make an annual deposit required under this section shall
constitute a separate violation.

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